Dive Brief:
- DoorDash priced its 33 million shares of its initial public offering Class A common stock at $102 per share, according to a press release. Stocks began trading on Wednesday and the offering is expected to close on Friday. The IPO share price was initially expected to be between $75 to $85 per share, but the company boosted its price to $90 to $95 based on its roadshow, which began last week, according to The Wall Street Journal.
- With the sale of these shares, which would raise nearly $3.4 billion, the company will be worth about $39 billion, more than double its last valuation of $16 billion when it was private, according to Law360. DoorDash is now the second largest IPO of 2020, after software company Snowflake raised about $3.9 billion.
- DoorDash's IPO far surpasses Grubhub's 2014 IPO, which raised nearly $200 million with its 7.4 million shares at $26 each. It also shows shifting investor sentiment on food delivery, which has grown in popularity among consumers this year. Previously, investors were starting to push back over the industry's lack of profitability.
Dive Insight:
DoorDash has had a meteoric rise since January 2019, when it reached into 50 states for the first time. Later that year, it became the dominant food delivery provider based on market share, and continues to dominate the industry at 51% share of sales as of October 2020, according to Second Measure. It was also named the fastest growing brand in the U.S. in Morning Consult's Fastest Growing Brands 2019 report.
Since the beginning of the pandemic, the company accelerated innovation, creating its Main Street Strong initiative, which included programs and products like turnkey online stores to help restaurants build online branding. The aggregator also added customer tracking for pickup orders, which provides notifications to merchants or restaurants when they arrive to pick up their orders. Last week, it rolled out its DoorDash Self-Delivery platform to offer restaurants the ability to list their menus online, but fulfill orders with their own delivery fleets.
Despite its growing popularity and suite of products, one of the company's biggest challenges will be to show that it is improving its profitability over time. Its revenue increased to $1.9 billion during the first nine months of 2020 compared to $587 million during the year ago period, but net loss is still at $149 million during the first nine months of the year. Its losses improved compared to $533 million during the year ago period. At the same time, it will need to maintain strong relationships with restaurants, especially after it has provided support and assistance such as commission-free offerings, partnerships to help with Paycheck Protection Program applications and grants to help restaurants winterize.
The company plans to use its new funding to expand its platform, develop or acquire new features, grow into new markets and increase its sales and marketing efforts. An expanded platform and more offerings could help it improve its profitability, especially if any new features and marketing efforts help it grow a more loyal customer base.
